Microtransactions will be the future of mobile gaming

Press release

Introduced to
the mobile games market in 2006, microtransactions are the new trend in
Korea that are predicted to become more popular as the business model
has proven to be successful, generating increased revenue game after
game. Roughly one third of games launched by SKT in 2007 have included
microtransactions, and the number of games with the microtransaction
feature is expected to grow in the near future. Currently, GAMEVIL,
Nexon Mobile, and Com2us are leading the market trend with
microtransaction featured games. Out of these publishers, GAMEVIL has
the highest percentage of games with microtransactions.

Before
they became popular in the mobile gaming market in Korea,
microtransactions were successful in other areas. The PC gaming
industry is an example of this. In the U.S., most consumers are willing
to buy PC packaged games. But in Asian countries like Korea, most
consumers have chosen to download copies of PC games online, given the
high-speed Broadband networks. This posed a problem, especially when
people could easily download pirated copies. Because of this, packaged
games did not sell well in Korea and companies were not able to make as
much money off of this. One of the solutions to this problem was
creating online PC games that have a Client-Server Model, which would
verify if the user was a subscriber. This became popular for hardcore
gamers but didn’t effectively target the casual gamers due to the high
subscription fee that the people had to pay every month. Free online
games became extremely popular too, but how do gaming companies make
money then? This is where microtransactions come into play. Around the
same time, companies like Neowiz had introduced microtransactions
through selling clothes and accessories for the avatars used in PC
chatting. This model was extremely successful and online game companies
started giving out the games for free. As these free games became
popular in Korea, so were there intense microtransactions of special
items and additional features in games. The customers were free paying
users.

Kartrider, one of the most played online games in Korea,
is a great example of how microtransactions were used. In this
multiplayer PC racing game, users can download the subscription free
game and enjoy the basic features of Kartrider. However, users who want
customizations and upgrades pay a small price. The free aspect of the
game initially hooks the user into first downloading the game, and then
the game play naturally induces the player to purchase additional
inexpensive features. But it’s not just microtransactions that make
this game special. Kartrider took advantage of the high-speed broadband
as well as the casual and community aspect of gaming. Players can race
with or against other players online, and one doesn’t have to be a
hardcore gamer to enjoy this game. Technology combined with a casual
gaming community served as the basis for the Kartrider
microtransactions model and helped make the game successful. The fact
that Kartrider has not only been successful in Korea, but also quite
popular in and brought to other countries like the U.S., shows that
this type of free, casual, microtransaction featured game will become
even more prevalent in the U.S.

In fact, subscription free
services like Facebook and MySpace are already common in the U.S as
broadband connections improved and people began living online. On
Facebook, users can enjoy the basics of the site for free and have the
option to send gifts to friends for $1 each, an example of how
microtransactions benefited a subscription free service with a casual
community.

In terms of online games, however, the U.S. mainly
uses the World of Warcraft model, where players purchase the game at a
fixed price and pay on a subscription basis to play online. World of
Warcraft is not a casual game, and not all players like young kids can
and are willing to pay $15/month. Payment issues such as not having
access to a credit card pose a problem. In fact, some casual gamers in
general wouldn’t even pay that much per month if they were only going
to play a couple times. So what do young kids and casual gamers play
nowadays? This group plays free casual games and only makes purchases
for around a dollar each when they want additional items. The
microtransaction feature generates revenues for these games. Users also
have alternative ways of purchasing and paying for items. For the game
Maple Story, another successful subscription free online game, prepaid
cards were available for purchase at Target stores, and ended up being
the second most sold content card next to iTunes. This makes sense,
considering that a good majority of players were young and did not have
access to credit cards. Other subscription free games operating on
microtransactions, such as RuneScape with its over 10 million accounts,
have also proven to be popular. The same example can be seen in Europe
with Habbo Hotel. These trends show how free online casual gaming is
clearly on the rise.

So how does this all apply to mobile games?
Well, microtransactions have also proven to be successful for mobile
phones in Korea. Just as free online games with the microtransaction
feature attracted more users, the same could happen to mobile games.

Most
of the games in Korea are sold at a fixed cost around $2.5 - $3.5.
Development costs are going up but publishers have been having a hard
time finding a new source of revenue. Thus, there needs to be other
more effective ways of making money when it comes to mobile games. In
Korea, publishers have used microtransactions in their games to
generate that additional revenue. The users have the option to pay an
additional price for extra features, items, or upgrades on their mobile
phones for their games. This model has been shown to work well, as
games like NOM 3, one of GAMEVIL’S latest mobile games, generated an
extra 40% of microtransaction revenue per download. Although this is
still charging the end users the initial download cost and then adding
microtransactions on top of it, the system has proven to be a success.
These days, there are careful new attempts of releasing free games that
rely only on microtransactions. This will broaden the mobile game
audience in general, and might be a successful model for the future.

However,
just as subscription-based online games became free games with
microtransactions in the U.S., we believe that the same might happen in
the mobile games industry in a couple of years. With subscription free
community-focused services such as Facebook and MySpace and games such
as Maple Story continuing to be popular in the U.S., subscription free
mobile games may also become the new trend. Microtransactions could act
as a vehicle in making games more enjoyable and exciting. There
wouldn’t be payment inconveniences for microtransactions as well, as
purchases done through a mobile phone could be charged directly to the
customer’s phone bill. But it’s not just subscription free mobile games
that may become more common. Just as the Internet has seen a rise in
online communities, whether it’s in sites like Facebook or games like
Maple Story, the community aspect of mobile gaming may become important
as well. Because of the nature of mobile phones, customers could become
more interested in games that allow them to connect and play with
friends or a group of people. For these types of games, especially
casual games, subscription free mobile games with microtransactions
could help draw more users, just as free online PC games have done. As
games like Maple Story appear more on mobile phones, publishers and
carriers may look more into microtransactions to generate additional
revenue.

Right now in the U.S., carriers are still focusing on
converting more customers to their service. All of their promotions are
still around voice. But as users settle more permanently on which phone
service they want, U.S. carriers may eventually have to shift their
focus to data revenue from content such as mobile games on their
phones, and learn more from the online PC gaming experience to address
the mass: microtransactions combined with a focus on the community will
not only help make a game successful and generate additional revenue,
but can also gain casual gamers who are a huge part of the consumer
market. Microtransactions can be simply explained as another way to
bill the users. But given the fact that we need a broader group of
audience, the microtransaction feature is a critical factor in enabling
the true experience of social network gaming in the market.